Page last updated at 23:40 GMT, Thursday, 15 May 2008 00:40 UK

Water sector competition proposed

Ofwat says competition would help lower costs

The water and sewerage industry should be opened up to competition, says regulator Ofwat.

Competition was "severely limited by legislation" and had "not developed successfully", said Ofwat, the regulator in England and Wales.

Opening up the sector would help it address climate change and water scarcity, as well as lower costs.

Ofwat said it would challenge firms on price and service until competition was "strong enough to protect customers".

"We propose that more of the market is opened progressively, starting with all business customers," said Ofwat.

In more than two years, not one of the 2,200 eligible business customers with an annual consumption of 50 megalitres - or one million litres - had switched supplier, said Ofwat.


The watchdog said competition would help "respond to the environmental challenge of water scarcity, which the government highlighted in its water strategy".

It also said "markets could spur innovation in developing and making better use of water resources and more water efficiency services, supporting sustainable water abstraction".

Ofwat is inviting comments on the proposals set out in this latest review - the second part of an assessment of the sector - by 28 August.

The government has commissioned an independent review of charging in the water sector, led by Prof Martin Cave.

When that review was launched in February as part of the Future Water strategy, the government set out a target to cut water usage from 150 to 120 litres per person per day by 2030.

At the time Environment Secretary Hilary Benn said: "The independent review will assess the effectiveness and fairness of different methods of charging, including metering and tariffs, and make recommendations.

"Our current system of charging, based largely on the value of people's homes 35 years ago, is archaic and rife with anomalies," he added.

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